narrow markets

Andrew Parker had a great post a few years ago where he sketched out all the startups going after pieces of Craigslist:

Startups that have tried to go head-to-head against the entirety of Craigslist (the “horizontal approach”) have struggled. Startups that have tried to go up against pieces of Craigslist (the “vertical approach”) have been much more successful (e.g. StubHub, AirBnB).

Recruiting looks like it’s going through a similar evolution. Last-generation products like LinkedIn are broad but not deep. Everyone I know who recruits uses LinkedIn, but none of them think it has solved their recruiting problems. Now we are seeing the rise of vertical solutions that are significantly better, e.g. Stack Overflow for developers and Behance for designers (at least that’s what I believe – I’m an angel investor in both).

The benefits of focusing are: 1) you can create a dramatically better user experience when it’s tailored to a specific use, 2) you can do unscalable hacks when starting out (e.g. AirBnb paying photographers to take pictures of apartments), 3) you need far fewer users to get to minimum viable liquidity, and 4) brand building is easier when you solve a straightforward, narrow problem (e.g. “I need a place to stay this weekend”).

This pattern – horizontal first, vertical second – is common. But you need to be careful. Back in 2003-2004, there was a lot of speculation that vertical search engines would eventually take down Google. A few categories worked (e.g. travel), but Google adapted in other categories (e.g. video, news) and lots of startups suffered.